Since the 1970s the financial system in the United States, and in some other rich nations, has been oriented around equity markets. Many firms are publicly owned, with stock ownership widely dispersed. Shareholders care first and foremost about appreciation in the stock price, and they believe short-run profit performance is the best indicator of likely appreciation.

Recent reports highlight some significant cracks in this system (The Economist, Felix Salmon, James Surowiecki, Andreas Utermann): fewer firms are now publicly traded, with more choosing to remain private or become partnerships; more firms that go public insist on a dual stock structure that limits shareholder voting rights; and financial advisers are paying more attention to dividends rather than simply share price.

I see two interesting questions going forward: (1) Will this amount to a significant shift over the next decade or two, or will these changes turn out to be marginal? (2) If the shift is large and sustained, will it help to remedy some of the drawbacks of the equity-market-centered system, such as short-termism, excessive speculation and risk-taking by financial institutions, and oversized compensation for those at the top of the corporate hierarchy? Will it have significant costs, such as smaller retirement nest-eggs and weakened oversight of firms’ conduct?